Cement price hike defended
Cement price hike defended
JAKARTA (JP): The government, in the face of incessant public
criticism, said yesterday that its recent decision to increase
the reference prices of cement by 40 percent was aimed at luring
more imports and attracting investment.
Coordinating Minister for Industry and Trade Hartarto said
Indonesia needed to import 2.5 million tons of cement and clinker
-- a substance used in cement production -- this year to meet the
increasing demand and to stabilize cement prices at market
places.
"In the short term, the importation of cement is the only way
to solve the problems caused by short supply. We have no other
way," Hartarto told a press conference, which was also attended
by Secretary General of the Ministry of Trade, Bakir Hasan,
Director General of Foreign Trade Djoko Moeljono, and Director
General of Chemical Industries Sujata.
Hartarto acknowledged that last week's decision to raise the
price had not been based on domestic production costs but on
international prices.
The new reference prices, averaging Rp 9,600 (US$4.32) per 40-
kilogram sack, are now about the same as the international price
levels.
According to Hartarto, a sack of cement is sold at an
equivalent of some Rp 11,500 in Singapore, Rp 12,000 in Brunei,
Rp 9,200 in the Philippines, Rp 8,500 in Malaysia, Rp 9,600 in
South Korea, Rp 8,700 in India and Rp 13,795 in Japan.
The government has assigned four state-owned trading companies
-- PT Tjipta Niaga, PT Dharma Niaga, PT Kerta Niaga and PT Mega
Eltra -- and the existing cement companies to carry out the
importation of 2.5 million tons of cement, Hartarto said.
Open
He emphasized that the importation of cement was open to any
company and that the duty on cement imports had been lifted.
"Everybody is welcome to import cement and, wherever you want to
sell it, just go ahead, please. Nobody will hinder you," he said.
He said Indonesia would continue to import cement for the next
two years because producers would only be able to meet domestic
demand in 1998, when expansion projects and a number of new
cement factories started production.
Retailers in a number of cities are reportedly selling cement
at prices above the reference prices set by the government.
In Jakarta, for instance, retail prices of cement were between
Rp 8,500 and Rp 9,500 per 40 kilogram sack yesterday, well above
the new reference price of Rp 8,290.
When asked on the current developments in cement prices,
Hartarto said: "We will just let prices float. I'm sure they will
go down by themselves as soon as we can balance the supply and
demand."
Critics have said that the new reference prices benefit only
cement producers because, under the old reference prices they
were already making large enough profits.
Responding to the criticism, Hartarto said: "It's true that
cement producers were still able to make a profit under the old
reference prices, but the profits were not enough to encourage
reinvestment in the cement industry."
Hartarto also rejected the suggestion that the 40 percent
increase in the cement reference prices could send this year's
inflation into two digits, as indicated by Chairman of the
Central Bureau of Statistics Sugito.
"We have to keep things in proportion, because the 40 percent
increase in reference prices is based on the old reference
prices, which were introduced in early 1993. So, the actual
increase is not that much. And the government is committed to
maintaining the inflation rate at less than 10 percent," Hartarto
said. (rid)